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New provision on German antitrust law enters the legislative process

On 1 July 2016 the German Ministry for Economic Affairs published a draft bill for a 9th amendment of the German Act against Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen – “GWB”). The draft bill addresses numerous topics which have been subject to intense discussions in German competition policy which will bring material changes to German antitrust law.

1. Expanded system of sanctions and fines

One of the main pillars of the 9th amendment is the elaboration of the present system on sanctions and penalties for antitrust violations. Under current German antitrust law, several major cases took place in which companies successfully underwent restructuring measures in order to evade the fines imposed on them. In the most popular case, this led to a penalty breakdown of the German Federal Cartel Office (Bundeskartellamt - FCO) amounting to EUR 120m in one single case.

To avoid similar cases in the future, the new provisions shall empower the FCO to impose fines also on companies’ legal successors, with that limiting the design possibilities for the limitations of liability. Furthermore, under the new provision theFCO shall be entitled to impose fines on a parent company, in case its subsidiary has been a member of a cartel and the parent company and subsidiary form one economic entity. The respective parent company will be additionally subjected to fines imposed by the FCO as under the future provisions the fines will be sized according to the revenue of the overall group. Significantly higher fines for antitrust violations should be expected.

2. Expanded abuse and fusion control targeting digital market players

Another central issue of the 9th amendment of the GWB is to adapt German competition law to accommodate the latest developments in the area of digital economics. For this reason, the new provisions significantly widen the scope of fusion control by implementing an additional threshold, stating that a merger is also subject to notification when the consideration exceeds EUR 350m.

Under the current antirust-rules, takeovers of small high profitable companies by big entities have not been subject to notification obligations when the smaller company did not reach the relevant turnover threshold of EUR 5m – a constellation relatively often found in the digital market. Anexample in this context is the takeover of WhatsApp by Facebook in 2014, when Facebook was willing to pay EUR 14bn for WhatsApp, which at that time did meet the turnover threshold of German merger control law. In the future, the additional consideration based threshold will empower the FCO to perform merger controls in such cases.

This provision is accompanied by the new Sec. 18 (3a) GWB, which clarifies that a market is also constituted in cases in which the specific service is performed free of charge. Due to the diverging position of the FCO and the Higher Regional Court of Düsseldorf, there is legal uncertainty on this point.

3. Implementation of Directive 2014/104/EU on Actions for Damages

The third substantial section of the 9th amendment of the GWB is deals with the Directive 2014/104/EU on Actions for Damages into German law. The proposal contains precise provisions on the applicability and scope of the passing-on-defence, the limitation of civil liability of crown witnesses, and raises the statute limitation period (dependent on knowledge) from 3 years to 5 years (maximum limitation period: now 30 years).

Moreover, and of high importance for future antitrust trials, the draft introduces mandatory legal presumption rules in the case of the existence of a cartel to theGWB. Based on these provisions, the occurrence of damage as well as the causal link between the respective cartel and the damage itself are assumed refutably.

Forecast

Although the draft bill is only at the beginning of the legislative process, it can already be said that 9th amendment of the GWB will have a significant impact on competition law practice. However, the draft bill does not consider controversial issues in German competition policy, such as the civil liability of the parent company for antitrust violations of its subsidiary, but such discussions may occur during the parliamentary debate. In any case, levels of regulation will increase and will trigger an additional demand for legal advice in competition law.